RBC Capital Markets warns that the U.S. dollar could decline as much as 40%, echoing the early-2000s selloff driven by changing global growth dynamics. Richard Kocinos, the firm’s chief currency strategist, predicts a prolonged dollar downtrend as economic momentum shifts away from the U.S. and real yields soften.
The report suggests investors prepare for a multi-year weakening cycle and recommends hedging exposure through synthetic call options on the ICE U.S. Dollar Index, along with bullish binary options on the euro and yen.
RBC says the next phase of currency markets may see renewed strength in Europe and Asia, reflecting improved capital flows and narrowing rate differentials as the Federal Reserve approaches the end of its tightening cycle.